Injection Molding Machinery
Date September 2019
- Smaller tonnage late model machines are seeing steady demand, while sales of 1990s and older machines continue to fall
- Market demand for used late model 400- to 600-ton injection molding machinery will be stable with the potential for a dip in demand as a result of the fluctuation in automotive sales
- The largest capacity machines will continue to struggle to maintain consistent demand and sale price levels, as these machines serve a much smaller segment of the market when compared to smaller capacity machines
By the numbers
Limited growth: The U.S. injection molding machinery market is heavily dependent upon vehicle sales to drive associated plastics manufacturing machinery demand. Auto manufacturers saw a decrease of 1.8 percent in new vehicle sales for fiscal 2017 followed by only a slight improvement of 0.3 percent for fiscal 2018. Most sales estimates for fiscal 2019 are hovering between 16.8 and 17 million units, which would trail the approximately 17.3 million units sold in 2018. The most recent data exhibits short-term positive momentum as new vehicle sales of over 1.6 million units for the month of August drove a 10.9 percent increase over August 2018, partially because of one additional selling day. July 2019 vehicle sales increased 7.7 percent from June 2019, which dipped 4.7 percent from May 2019. These sales numbers reflect the sporadic positive momentum exhibited throughout most of 2019.
Through August 2019, total domestic vehicle unit sales totaled 11.4 million and were essentially flat year over year (-0.1 percent), as lower passenger car sales (-8.0 percent) were balanced by improving truck and SUV sales (+4.0 percent), which make up the larger share of units sold. As previously indicated, sales trends can easily shift, as the industry continues to see uneven demand from month to month. On a positive note, falling trends in new auto sales could lead to an increase in demand for aftermarket parts, as consumers utilize their older vehicles for longer periods of time. Given the shift, Tier 1 and Tier 2 automotive suppliers should see less demand from car makers but could see increased demand for aftermarket parts. These two forces will be somewhat at odds, but given the fact that the auto market is still historically strong, any decrease in demand and value for injection molding machinery should be limited and consistent with historical value depreciation.
Machinery demand trends: Smaller tonnage late model machines are seeing steady demand, while sales of 1990s and older machines continue to fall. For 2019, forecasts indicate increasing demand for some specific packaging, such as bottled water and generally for pharmaceuticals, while food-related demand will be level. This should continue to support stable demand for later model injection molding machines in this class.
Market demand for used late model 400- to 600-ton injection molding machinery will be stable with the potential for a dip in demand as a result of the fluctuation in automotive sales. The most recent auction data has shown demand for this category of molding machines to be less stable than normal with regard to mid-2000s machines and stable for newer vintage machines. Given the projections for automotive production going forward, the value trends should stabilize at slightly lower levels than in past years, as end users adjust to current and forecasted production levels. The largest capacity machines will continue to struggle to maintain consistent demand and sale price levels, as these machines serve a much smaller segment of the market when compared to smaller capacity machines.
Given the changing landscape for injection molding machinery across a broad range of sizes and types, it is always important for lenders to partner with an appraiser that has up-to-date information on value trends. Gordon Brothers’ proprietary database contains millions of auction records, and appraisers monitor current sales performance and value trends on a day-to-day basis. This detailed information creates additional security in knowing that appraised values reflect real-world results.
Industry benchmark: North American shipments of new plastics machinery declined in the first quarter of 2019 by 27.6 percent. Despite second quarter improvement of 8.2 percent, generally numbers are down for 2019 and are projected to be weaker than in 2018. This data reflects figures released in August 2019 by the Plastics Industry Association’s Committee on Equipment Statistics.
From a machinery type standpoint, injection molding and single screw extrusion machines have continued to see positive sales numbers, whereas twin screw extruders are continuing to exhibit weaker demand. The overall depressed shipment numbers versus 2018 can be attributed to a number of causes, predominantly the slowing of investment by many companies as they evaluate the new trade policies and resulting economic climates.
Technology improvements driving upgrades: With production demand as strong as ever during the past three years, the need to upgrade and refurbish older machines has become increasingly important, as companies try to maximize capacity. In the United States the average age of an injection press is approximately 15 years. These older assets, when not refurbished or upgraded, decrease in value at an accelerated rate and become comparatively less marketable. Newer all-electric molding machines are increasingly desirable because of their lower operating costs. The movement towards greater automation has also spurred sales for associated robotics.
Brand impacts value: Brand recognition remains an important factor in determining the value of injection molding machines. Top manufacturers include Husky, Engel, Milacron, Krauss-Maffei, Nissei, Toshiba, and Sumitomo (SHI) Demag, each of which is known for its high-end quality and strong brand recognition. Brand recognition does improve expected liquidation recoveries, as buyers lean toward machines and brands with which they are familiar.
Industry landscape: Injection molding machinery presents a highly competitive landscape for players operating within the market and is dominated by international players because the market space is highly capital-intensive in nature. Market vendors are also experiencing demand from the medical and orthodontics industry, which is expected to drive the demand for injection molding machinery until 2020 at a minimum.
Forecast stable: Secured lenders should continue to monitor the trajectory of the automotive industry while also watching the impact of resin prices on the profitability of plastic product manufacturers. Industry experts say automotive suppliers will continue to invest in multicomponent technology and move to reduce weight, which means the automotive market will continue to be a market driver in the coming year.
While current conditions and projections for these underlying elements look to remain at historically stable levels, growing uncertainty as a result of the ongoing tariff war and lengthening negotiations for the United States-Mexico-Canada Agreement is affecting domestic and international markets. Time will tell if these factors will have a negative trickledown effect on the demand for plastics-related products and their associated production machinery.